WASHINGTON, December 23, 22:25 /ITAR-TASS/. Armenia has made significant progress in recovering from the global crisis and reorienting its economy, but important challenges remain, the International Monetary Fund said on Monday, December 23, after the conclusion of the IMF mission to the country.

Mission Head Mark Horton, who visited Yerevan on December 9-18, said the challenges included responding to the slowdown of growth in 2013, low private and foreign direct investment in recent years, and relatively high poverty and unemployment.

“The external current account deficit has been reduced significantly since 2009, including in 2013, but it remains relatively high. While there has been important progress on structural reforms, including in the financial sector, pensions, social benefits, and civil aviation, further business environment improvements are needed to strengthen competition, competitiveness, and connectivity. These actions would help shift private activity to investment and boost exports. In other areas, such as the energy sector, actions are needed to better assess and mitigate risks,” he said.

Horton pointed out that the new programme under discussion would aim at “consolidating stability and implementing further reforms to support Armenia’s transition to a dynamic emerging market economy.”

In 2014, the budget deficit is expected to increase with higher capital spending and wage and pension increases. From 2015, the programme would target a continued increase of capital spending, along with a gradual reduction of the fiscal deficit. Better risk analysis, improved compliance, a more level playing field, and closing of tax gaps would support stronger revenues for social and investment needs and deficit reduction. This would place public debt on a downward path. Monetary and exchange rate policies would continue to target low inflation and support the external adjustment, the IMF official noted.

The Central Bank of Armenia would maintain its buffers at healthy levels and strengthen its capacity to respond to shocks. The programme would also support measures to promote financial sector deepening and further improve the business environment, including by strengthening Armenia’s legal framework in these areas. The programme would aim to promote higher investment, exports, and growth, and in turn, help to reduce poverty and unemployment, Horton said.

The Fund mission and the Armenian authorities made significant progress in discussions on policies and actions for 2014-2017 that would be supported by a possible new Extended Fund Facility arrangement. Further discussions are expected during the next few weeks, the IMF said.

During the visit to Yerevan, the mission met with Prime Minister Tigran Sargsyan, Minister of Finance David Sargsyan, Central Bank of Armenia Chairman Artur Javadyan, Minister of Economy Vahram Avanesyan, Minister of Energy and Natural Resources Armen Movsisyan, and Minister-Chief of Staff of the Government Vache Gabrielyan, as well as other senior government officials and representatives of the international community and the banking and business sectors.